As we move into the second half of the year, and with the Labour Government announcing many financial changes which are likely to significantly impact the workforce, many businesses are feeling the pinch and are exploring their options in a bid to save costs.
One option that employers are giving more thought to at present is redundancies. Recently we have witnessed top GPs calling for “urgent assurances” from the health secretary that practices will be exempted from the hike in national insurance employer contributions announced in the Budget whilst some care homes could be forced to close.
How to cut costs without making redundancies
While redundancies may sometimes be necessary within a business, employers are encouraged to give serious consideration to alternative cost-saving strategies. Options include:
A reduction in headcount: this may be via a recruitment freeze, deferring new starters, or offering early retirement. This can be accompanied by offering retraining to existing staff to cover the skills that would have been brought in via recruitment or exploring secondments.
A reduction in hours: this may include increasing the availability of part-time or flexible working, or reducing available overtime.
A reduction to benefits: other, more serious options may include a pay freeze, changes to bonus schemes (before doing so employers must consider whether they are discretionary, linked to performance, intended to reward etc), or amending existing policies such as reclaiming expenses. When contemplating such actions, an employer must have regard to its obligations under the relevant contracts of employment (for example, it may not be possible to amend certain terms without employee agreement).
Temporary stoppages: these may include:
- sabbaticals – cutting human resource costs will depend on a number of factors, including the economic climate, the level of risk of job losses, employees’ personal and financial circumstances and the overall effect of the sabbatical on job security and future job prospects.
- unpaid leave – employees’ consent is required unless the contract (or collective agreement) contains a clause allowing the employer to place employees on unpaid leave.
- holidays – as an alternative to unpaid leave, an employer could require employees to take their contractual or statutory annual holiday allowance at quiet times (provided it gives employees adequate advance notice under the Working Time Regulations).
- lay-offs – it has become fairly common, during periods of economic uncertainty, to lay off all or some employees during a short-term and temporary slow down in work. Employers must have a contractual right to lay off, however employees remain employed throughout the lay-off period but there is then flexibility to restore the workforce when trade starts to pick up.
The implementation of cost-saving measures can be a very stressful period for employer and employee alike, and so it is important to ensure that any changes are communicated in good time to employees. An open and transparent approach will help to ensure that trust and morale are maintained and may assist with keeping skilled staff from seeking alternative opportunities.
Points to consider in a redundancy process
It is not, however, always possible to avoid redundancies. If they become necessary, employers must ensure:
- The process is fair. As ACAS commented, the law on redundancy is clear and employers must ensure that they follow a fair process from choosing the selection criteria and who will be in the redundancy pool(s), to conducting the scoring exercises and making the final decisions, including the consideration of suitable alternative roles.
- The consultations are genuine. An employee or union may come up with a viable suggestion or alternative during the consultation stage, which the employer is obligated to take into account. Employees at risk of redundancy should be given the chance to comment on the pool, criteria and method.
- The relevant information is available. By ensuring that employees understand the process and how it will affect them, and communicating any decisions quickly and respectfully, an employer can manage the impact of the process on the workplace and preserve its relationship with its retained employees.
Whether you are an employer considering restructuring or redundancies, or you are an employee affected by a redundancy process, our redundancy solicitors would be more than happy to assist with any queries.
